3 aerospace and defense stocks to strengthen your portfolio
It is always important for investors to consider who is paying for a company’s products or services before adding the shares to their long-term accounts. After all, a company can have the most innovative and cutting edge business in the world, but if its customers are unable to pay for its products, it will never be successful. This is a big reason aerospace and defense companies are so attractive because their biggest customer has infinite money – the US government.
These are companies involved in the manufacture of all different types of aircraft, as well as national defense equipment and machinery. The recent riots in Afghanistan have made investors aware of the importance of these companies in the overall national security system, and with the House of Representatives passing US $ 768 billion in defense law in September, it is clear there are many will award contracts to the top names in the industry. Many of these stocks have rallied during recent market volatility, which means they might really be ready to take off when the market regains a foothold.
That’s why we’ve compiled the following list of 3 aerospace and defense stocks to help add strength to your portfolio. Let’s take another look below.
Northrop Grumman (NYSE: NOC)
This is the second largest defense company in the United States and certainly one of the highest quality stocks in the aerospace and defense industries, so it should be one of the first names to look out for in this type of exposure. Northrop Grumman is a solid choice thanks to the company’s diversity in its businesses, which include aerospace systems, defense systems, mission systems and space systems. All of the company’s various operating segments should see strong global demand in the years to come, and investors can rest assured that Northrop will win some big deals from the Pentagon thanks to an increased defense budget.
Other reasons to consider stocks of this legendary defense company include Northrop’s earnings per share increase 7% year over year in the second quarter and the recent 8% dividend increase. Northrop is also known for being a more advanced technology defense company, which is another unique competitive advantage. This has helped the company win deals like the ground-based strategic deterrent program and the B-21 bomber program, both of which should offer the company good growth opportunities going forward.
Raytheon Technologies (NYSE: RTX)
Some of these companies offer exposure to the commercial aerospace industry, which could see a strong rebound once the effects of the pandemic wear off. Such is the case at Raytheon Technologies, which includes specialist in aerospace structures, avionics, mechanical systems and interiors, Collins Aerospace Systems and Pratt & Whitney, a global provider of aircraft engines. While this part of Raytheon’s business is dependent on commercial aviation and could pose some risk if the industry recovers more slowly than expected, the company is also generating significant revenues from its defense and intelligence businesses to keep investors calm.
The company has just signed a contract worth up to $ 1.3 billion with the U.S. Navy to deliver Evolved Seasparrow Missile (ESSM) Block 2 through March 2025. This is a reminder to investors of how lucrative some of these defense contracts can be. The fact that Raytheon offers investors a dividend yield of 2.33% and is on the verge of hitting new all-time highs makes it one of the leading aerospace and defense stocks to add right now.
General Dynamics (NYSE: GD)
Again, it is usually worth focusing on quality names in a sector, and General Dynamics is certainly spot on. The company offers a wide range of aerospace and defense products including Gulfstream jets, nuclear submarines, Abrams tanks and IT solutions. If you think geopolitical tensions are on the rise, it might be a good idea to start a position with a company like General Dynamics, as it generates about 68% of its total revenue from the US government.
You may be familiar with the company’s Gulfstream business jet line, which is the world’s largest manufacturer of business and private jets. This part of the company has been hard hit by the pandemic, but it should recover strongly in the coming months as vaccines make flying more comfortable for business travelers. This company’s marine segment, which includes a contract to build Columbia-class submarines with planned procurement by 2042, is also of great interest to investors.
Should you invest $ 1,000 in Northrop Grumman now?
Before you think about Northrop Grumman, this is what you should hear.
MarketBeat tracks Wall Street’s top-rated, top-performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat identified the five stocks that top analysts are whispering to their customers to buy now, before the broader market takes hold … and Northrop Grumman wasn’t on the list.
While Northrop Grumman is currently rated “Buy” by analysts, top-rated analysts think these five stocks are better buys.
Check out the 5 stocks here
Companies mentioned in this article
Compare these stocks Add these stocks to my watchlist